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Terms Beginning with R
       
       
 

Residual-Interest Certificates

Financial Term


Residual-Interest Certificates (RICs) are financial instruments used in the securitization market that represent the residual interest in a pool of assets. These assets are generally loans such as mortgages, car loans, or other types of financing agreements.

RICs are created by separating the cash flows from a pool of assets into two components: the principal and interest payments made by the borrowers and the residual interest. The principal and interest payments are typically used to create other securities, such as mortgage-backed securities (MBS), while the residual interest is used to create RICs.

The residual interest represents the excess cash flows from the pool of assets after all other securities have been paid. This excess cash flow is then divided into RICs based on a predetermined formula. RICs are typically bought and sold by institutional investors and can be a way for investors to gain exposure to a pool of assets without having to purchase the underlying loans directly.

RICs can be used as a means of financing by financial institutions. For example, a bank can use RICs to obtain funding by selling the residual interest in a pool of loans to investors. This can provide the bank with additional liquidity, improve regulatory ratios, and reduce its exposure to the underlying loans.

Overall, RICs offer a unique investment opportunity for both issuers and investors in the securitization market.


   
     

Residual-Interest Certificates

Financial Term


Residual-Interest Certificates (RICs) are financial instruments used in the securitization market that represent the residual interest in a pool of assets. These assets are generally loans such as mortgages, car loans, or other types of financing agreements.

RICs are created by separating the cash flows from a pool of assets into two components: the principal and interest payments made by the borrowers and the residual interest. The principal and interest payments are typically used to create other securities, such as mortgage-backed securities (MBS), while the residual interest is used to create RICs.

The residual interest represents the excess cash flows from the pool of assets after all other securities have been paid. This excess cash flow is then divided into RICs based on a predetermined formula. RICs are typically bought and sold by institutional investors and can be a way for investors to gain exposure to a pool of assets without having to purchase the underlying loans directly.

RICs can be used as a means of financing by financial institutions. For example, a bank can use RICs to obtain funding by selling the residual interest in a pool of loans to investors. This can provide the bank with additional liquidity, improve regulatory ratios, and reduce its exposure to the underlying loans.

Overall, RICs offer a unique investment opportunity for both issuers and investors in the securitization market.


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